G. Vikram Kumar vs State Bank of Hyderabad & Ors.

Case Number: Civil Appeal No. 31523153 of 2023 (@SLP (Civil) no. 59735972 of 2018)
Judges Name: Hon’ble Judges Mr. Justice M.R. Shah J, Mr. Justice C.T. Ravikumar J
Order dated:  02. 05. 2023

Facts of the case: 

  1. The builder – respondent no. 3 took a loan from the bank – respondent no.2 for a multi-storage housing project, but was not able to repay the security interest. Bank initiated proceedings against the properties attached by the borrower under section 13 of the SARFAESI Act. The borrower filed S.A. No. 253 before DRT against the action taken by the bank. DRT, after giving ample time to the borrower, permitted the bank to proceed with the sale but should not confirm until the next hearing as the borrower had sold 7 out of 37 flats. Flat No.6401 – flat in question was not amongst the said seven flats.
  2. An MoU between respondent 1 and the borrower regarding Flat No. 6401 was entered for Rs. 45 lakhs after the bank and the borrower obtains clearance to process the sale agreement. The said agreement of sale was executed by the borrower without the consent of DRT or the bank. The borrower had permission only for 7 flats.
  3. Later on, the Bank issued a public notice on 28.7.2016 for the action of properties with Flat no. 6401 in Lot 1 of the auction on 30.8.2016. The borrower filed an application for a stay of the auction and the stay was rejected. Then, the auction was conducted and the appellant also participated and became the bidder of flat no. 6401. He paid 25% of the bid amount and bank-issued the receipt.
  4. Then, respondent 1 filed a writ in High Court challenging the auction of flat no. 6401, without disclosing the completion of the auction. Thus, High Court stayed the auction stating that Respondent 1 paid the required amount before the scheduled time. The bank issued notice to the appellant about the stay of the auction given by the High Court. In the meantime, Respondent 1 also paid the amount to the bank as directed by High Court.
  5. Later, the appellant filed an application for impleading the writ and filed a counter affidavit. In the affidavit, it was stated that the DRT has declared the agreement of sale as void and the appellant is the successful bidder while Respondent 1 did not disclose the completion of the auction in the writ petition. It was also stated that Respondent 1 would have rights only under section 17 of the SARFAESI Act. The High Court allowed the impleading application. In spite, the High Court allowed the writ petition by Respondent 1. Thus, the appellant filed a review petition which was dismissed by the High Court. Thus, the appellant filed the current appeals.

Hon’ble Supreme Court observed/held as follows:

  • The aggrieved party has a remedy by appeal under section 17 of the SARFAESI Act against any step taken by the bank under section 13(4) of the same act. 
  • Thus, High Court ought not to have entertained the writ petition but committed a serious error.
  • As per MoU, respondent 1 was aware of the pending case and still agreed to sell. The DRT also held the sale agreement void. 
  • Then, the borrower failed to obtain an order, and Respondent 1 filed a writ challenging the auction which the borrower failed to get relief from DRT.
  • Respondent 1 has got relief from the DRT but the borrower failed to invoke section 13(8) of the SARFAESI Act and clear dues through the DRT.
  • If Respondent 1 approached DRT, he would have been nonsuited. So, Respondent 1 filed a writ before High Court after the completion of the auction.
  • Thus, impugned order & order passed by High Court is unsustainable.
  • Respondent 1 or his heirs can’t get benefits from the void sale.
  • The sale certificate is issued in favour of the appellant.
  • The amount deposited by respondent 1 shall be returned with 9% interest within 4 weeks from the date of passing of this order.
  • The heirs of respondent 1 shall be given 3 months to vacate the flat in question.
  • The Hon’ble Supreme Court allowed the appeals.

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